It is true that at the large corporation levels (multinational), Chinese companies behave like most western companies, but this quickly changes as you move to dealing ingovernment operated businesses or the smaller than $50 million USD companies. Here is a list of the Top 10 differences when doing business in China.
1.Relationship first!
Chinese people as a whole value relationship much more than American people do. In business the initial effort is usually 80% - 90% focussed on developing the relationship. In fact, the objective of a business meeting is to develop a relationship (in Chinese terminology; a“cooperation”). Opposite to the American approach of “closing” the deal. American business culture has common phrases like“business is business” and “we don't have to be friends to do business”, implying the order of importance. Chinese practice the opposite, we have to be friends to do business.
2. “How is biz?”
Another big difference! It is not only quite inappropriate, but can also be considered “rude” to ask, how is your business? or even more offensive ask for sales figures. Chinese business people will only volunteer this information to a close friend or people they have a very close relationship with. Opposite to the American presentation (sometimes required) of a detail company profile prior to initiating any negotiation.
3. The Business Plan.
In Chinese business generally speaking the request of abusiness plan will incite a response like, oh... you don't trust us? In China the majority of business is done over days of dinners, lunches, drinking tea and wine and talking about life in general. Business will develop out of these encounters aimed at developing trust and relationship sprinkled with business details nowand then. Opposite to the methodical American approach, concept, features, requirements, sales, marketing, costs of goods, financial statements, etc. ManyChinese people will literally invest millions of dollars without nothing more than a handshake, it is all about trust.
4. The “Face” Game.
Chinese culture and particularly business revolves aroundthe value of your “face” to others. “Face”; defined as how others may see you; asin your level of status in society or your ability to command respect and trust fromothers. For American business people this is extremely difficult to deal with as it flies directly in the path of disclosure and transparency. For Chinese, the very fact that you would be asked for details takes away from you “face” value. A simple example of this concept is the fact that Chinese people will likely never allow you to pay for a meal or entertainment as this is done by the person with the most “face” in the situation.
5. Family Business.
In America the word “Nepotism” is not a complementary statement, in fact you can land in the middle of legal lissues for favoring a family member for your business rather than a more qualified stranger. Not in China! It is possibly one of thes trongest unwritten rules of business, a business owner will carefully select family members and close friends for the most critical positions in a business. This is party
due to trust and partly due to the “face” issue, qualifications are largely overlooked.
6. Sales= Alcohol+Karaoke.
In Chinese business sales is hardly regarded as a profession and most often is only looked as a sort of functional entertainer. While it is true that America has a great deal of this type of sales, it is also regarded as “undesirable” by most companies, particularly if you look at it in the Chinese business context. China's smaller businesses (under $50 million in sales) have primarily two types of sales people; very young people (mostly women 20-24years old) and older men (40-50 years old). The expectation of these sales people is almost 100% to work on cultivating relationships, so they must be very good at hosting. A good host in Chinese terms is one that has the ability to conduct the rituals of eating food, drinking alcohol and entertaining at KTVs (karaoke bars) with all the finesse of giving the client a VIP treatment (big “face”). Opposite to American counterparts Chinese sales people are not really expected
to know much about the product or the company they represent.
7. Marketing is a dirty word.
In Chinese smaller companies the word Marketing is most often interpreted as a “multi-level marketing scam”. There is very little understanding of the function of marketing or the need for it. In fact advertising is done completely in a “shot-gun” approach, it is invasive, in your face and breaks every rule known to American marketers as the do's and don'ts of promoting your products or services. The fact that marketing is an unknown concept in most realms in China is no surprise if you add the first 6 points of this post. This gives reason for a great deal of the “copy” mentality, if it sold well for Nike or Sony or
Ping, it will sell well for our company! There are also a large number of products that are designed, developed and manufactured without knowing if there is even a market for them.
8. Introductions.
It is very common in Chinese meetings that you may sit with agroup of people that will never be be formally introduced. On counter viewAmerican common business rules not only require introducing the people attending a meeting, but also describing their relevance to the topic of the meeting. This is quite uncommon in many Chinese business meetings and as a result it maybe difficult to identify who are the key players. However, if you are able to speak/understand mandarin and are familiar with the nuances of addressing someone by name, you will likely be able to deduce order of importance by the title (similar to Mister or Chief) attached to the person's name,if they are ever introduced.
9. Concluding a meeting.
This difference probably is the most frustrating to both Chinese and Americans when doing business together. Chinese business is largely inconclusive, open ended and uncommitted. American business is NOT finished until there is a conclusion, if thereis no deal, no next step; it is considered an unsuccessful meeting! In Chinesebusiness it is considered rude to try toforce an answer or a conclusion. This issue quite often can derail a negotiationas American business people have it ingrained to achieve an “end”, whileChinese are focused on developing arelationship or a “cooperation”.
10. Starting a Business/Company.
In China it is almost a requirement to have 100% of the infrastructure for a business orcompany developed even before getting a business license. This is somewhat a cultural issue and somewhat a regulatory one. Local governments will actuallyinspect and take photographs of the intended business location prior to issuing alicense. The expectation is that you have to largely look like the business which you are applying for; that is to say if you are going to manufacture shoes, you are expected to have a shoe factory set up, machines, people, offices, etc. This fact coupled with the absence of a business plan or market study makes it anabsolutely incomprehensible logic for American business people. However, it is
important to note that culturally Chinese people have an extreme level ofconfidence and belief in their own capabilities and venture into anything with anad-hoc approach of making things happen as they go. This is counter parallel to American business culture which also has a deep belief in the innate ability toaccomplish, however, backed by data and facts prior to taking step one.
There are definitely exceptions and things are changing at a phenomenal speed in China. Many Chinese are now returning from studying business in the US or Europe and are bringing back with them western ways of doing business into the evolving Chinese business environment. There is also a great deal of demand for American business know-how and some companies are beginning to value American consulting services, particularly when it comes to quality manufacturing methodologies and structured business management. Of course you could always leave this to the pros and let us be your China sourcing service.
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